Analyst Steve Condon, of the portfolio-management firm Truepoint Capital in Cincinnati, said he's been trying to convince jittery clients lately not to unload their stock holdings.

"At these valuations, you have to be a buyer if you're investing for a long-term frame," said Mr. Condon. "At the very least, if we can't get people to add to their positions, we try to avoid liquidating."

China's Shanghai Composite surged 6.1% Wednesday on hopes Beijing will step up its attempts to stimulate the country's economy. Like the U.S., China has already seen a previous stimulus plan fall flat in the markets.

The U.S. and China are viewed as twin engines of global economic growth, and China's rapid industrialization helped drive a surge in commodities prices that peaked last year. China's surprising vulnerability to the financial crisis was one of the biggest weights on industrial and commodities sectors in recent months.

Technology stocks broadly benefited from hopes for stronger growth in China and elsewhere. The Nasdaq Composite Index advanced 32.73 points, or 2.5%, to 1353.74 as
Yahoo,
up 5.3%,
Research In Motion,
up 6.7%, and
Apple,
AAPL 1.30%
up 3.2%, rallied.

GE remained a notable weak spot, however, sliding 4.6%. Investors fear that problems in the conglomerate's financial unit could lead to GE losing its AAA credit rating. GE shares have been hammered alongside those of banks and insurers, and are down roughly 58% this year. GE briefly dipped below $6.

Some traders are betting GE will rebound. "Broken up has to be worth a lot more than it's trading for; there's not a business they're not in," said Joe Kinahan, chief derivatives strategist for brokerage thinkorswim. "People are ignoring their good businesses ... they do a lot of things well.

Aside from the improving oil-demand picture overseas, traders also responded to new data showing declining U.S. stockpiles of crude.

Energy broker Mike Fitzpatrick, of MF Global in New York, said that the oil market also seems to be pricing in possible inflation as the U.S. government begins spending to stabilize the sagging economy in the months ahead.

Traders work on the floor of the New York Stock Exchange in New York, U.S., on Wednesday, March 4, 2009. Photographer: Jonathan Fickies/Bloomberg News
Bloomberg News

He said trading in stocks and bonds lately has functioned inefficiently to price in such risk, with Treasury holders in particular sometimes proving unwilling to unload their bonds out of sheer fear of being repaid by borrowers in the private sector.

That wasn't the case Wednesday, as the benchmark 10-year note's price fell 27/32, pushing the yield to 2.987%. Mr. Fitzpatrick said that market will need more than just a one-day selloff before it fully returns to normal, including a more consistent rotation of investors out of Treasurys and into stocks.

"Equity and interest-rate markets have become a daily referendum on the latest stimulus or other government policy measure," said Mr. Fitzpatrick. "But whatever real value people see being created or lost in the economy is being expressed in the commodities markets."

Brothers Don and Bob Bright, partners in the proprietary firm Bright Trading in Chicago, are more hopeful that the financial markets have returned to normal for now. They believe the latest round of gains could mark the start of a longer rally lasting perhaps through the summer, though they stopped short of declaring an end to the overall bear market.

"Let's just say the bear is asleep for now," said Don Bright.

He was encouraged Wednesday by a 6.6% slide in the Chicago Board Options Exchange's Volatility Index, which uses options prices to measure investors' fear of an upcoming market swing.

Bob Bright said it seemed that plunge was driven largely by a sharp slowdown in purchases of put contracts, which can be used to hedge against sudden losses in shares one already owns. He also had trouble selling calls on his holdings &ndash; an alternative hedging strategy used by many traders during down markets.

Fresh economic data in the U.S. were bleak. ADP's report on employment showed the private sector shed 697,000 jobs in February. And the Institute for Supply Management's index of service-sector activity fell to 41.6 in February, from 42.9 in January.